MEDIA, TECH, BUSINESS MODELS

OIP

Prominent members of the European press are joining a major EU-induced antitrust lawsuit against Google. The move is short on rationale and long on ideology.

A couple of weeks ago, Axelle Lemaire, France’s deputy minister for digital affairs, was quoted contending Google’s size and market power effectively prevented the emergence of a “French Google”. A rather surprising statement from a public official whose profile stands in sharp contrast to the customary high civil service profile. As an MP, Mrs Lemaire represents French citizens living overseas and holds dual French and Canadian citizenship; she got a Ph.D. in International Law at London’s King’s College as well as a Law degree at the Sorbonne. Ms. Lemaire then practiced Law in the UK and served as a parliamentary aide in the British House of Commons. Still, her distinguished and unusually “open” background didn’t help: She’s dead wrong about why there is no French Google.

The reasons for France’s “failure” to give birth to a Google-class search engine are simply summarized: Education and money. Google is a pure product of what France misses the most: a strong and diversified engineering pipeline supported by a business-oriented education system, and access to abundant capital. Take the famous (though controversial) Shanghai higher education ranking in computer science: France ranks in the 76 to 100 group with the University of Bordeaux; 101 to 150 for the highly regarded Ecole Normale Supérieure; and the much celebrated Ecole Polytechnique sits deep in the 150-200 group – with performance slowly degrading over the last ten years and a minuscule faculty of… 7 CS professors and assistants professors. That’s the reality of computer science education in the most prestigious engineering school in France. As for access to capital, two numbers say it all: according to its own trade association, the size of the French venture capital sector is 1/33th of the US’ while the GDP ratio is only 1 to 6. That’s for 2013; in 2012, the ratio was 1/46th, things are improving.

The structural weakness of French tech clearly isn’t Google’s fault. Which reveals the ideological facts-be-damned nature of the blame, an attitude broadly shared by other European countries.

A few weeks ago, a surreal event took place in Paris, at the Cité Universitaire Internationale de Paris (which wants to look like a Cambridge replica). There, the Open Internet Project uncovered the next European antitrust action against Google. On stage was an disparate crew: media executives from German and French companies; the former antitrust litigator Gary Reback known for his fight against Microsoft in the Nineties – and now said to help Microsoft in its fight against Google; Laurent Alexandre, a strange surgeon/entrepreneur and self-proclaimed visionary living in LuxembourgBrussels where his company DNA Vision is headquartered, who almost got a standing ovation by explaining how Google intended to connect our brains to its gigantic neuronal network by around 2040; all of the above wrapped up with a speech from French Economy Minister Arnaud Montebourg who never misses an opportunity to apply his government’s seal on anti-imperialist initiatives.

The lawsuit alleges market distortion practices, discrimination in several guises, anticompetitive conduct, preference for its own vertical services at the expense of fairness in its search results, illegal use of data, etc. (The summary of EU allegations is here). The complaint paves the way for painstaking litigation that will drag on for years.

Among the eleven corporations or trade groups funding the lawsuit we find seven media entities, including the giant German Axel Springer Group, Lagardère Active whose boss invoked the “moral obligation” to fight Google. There is also CCM Benchmark Group, a large diversified digital player whose boss, Benoît Sillard, had his own epiphany while speaking with Nikesh Arora in Mountain View a while ago. There and then, Mr. Sillard saw the search giant’s grand plan to dominate the digital world. (I paid a couple of visits to Google’s headquarters but was never granted such a religious experience – I will try again, I promise.)

Despite the media industry’s weight, the lawsuit fails to expose Google practices directly affecting the P&L of news providers. Indeed, some media companies have developed business that competes with Google verticals. That’s the case of Lagardère’s shopping site LeGuide.com but, again, the group’s CEO, Denis Olivennes, was long on whining and short on relevant facts. (The only fun element he mentioned was outside the scope of OIP’s legal action: with only €50m in revenue, LeGuide.com paid the same amount of taxes as Google whose French operation generates $1.6bn in revenue).

Needless to say, that doesn’t mean that Google couldn’t be using its power in questionable ways at the expense of scores of e-retailers. But as far as the media sector is concerned, gains largely outweigh losses as most web sites enjoy a boost in their traffic thanks to Google Search and Google News. (The value of Google-generated clicks is extremely difficult to assess — a subject for a future Monday Note.)

One fact remains obvious: In this legal action, media groups are being played to defend interests… that are not theirs.

In this whole affair, the French news media industry is putting itself in an awkward position. In February 2013, Google and the French government hammered a deal in which the tech giant committed €60m ($81m) over a 3-year period to fund digital projects run by the French press. (In 2013, according to the fund’s report, 23 projects have been started, totaling €16m in funding.) The agreement between Google and the French press stipulates that, for the duration of the deal, the French will refrain from suing Google on copyrights grounds – such as the use of snippets in search results. But those who signed the deal found themselves dragged in the OIP lawsuit through the GESTE, a legacy trade association – more talkative than effective – going back to the Minitel era that supports the OIP lawsuit on antirust rather than copyrights grounds. (Those who signed the Google Funds agreement issues a convoluted communiqué to distance themselves from the OIP initiative.)

In Mountain View, many are upset by French media that, on one hand, get hefty subsidies and, on the other, file an anti-Google suit before the Europe Court of Justice. “Back home, the [Google] Fund always had its opponents”, a Google exec told me, “and now they have reasons to speak louder…” Will they be heard? It is unlikely that Google will pull the plug on the Fund, I’m told. But people I talk to also said that any renewal, under any form, now looks unlikely. So will be the extension of an innovation funding scheme in Germany — or elsewhere. “Google is at a loss when trying to develop peaceful relations with the French”, another Google insider told me… “We put our big EMEA [Europe and Middle East] headquarters in Paris, we created a nicely funded Cultural Institute, we fueled the innovation fund for the press, and now we are bitten by the same ones who take our subsidies…”

Regardless of its merits, the European press’ involvement in this antitrust case is ill-advised. It might throw the relationship with Google back to the Ice Age. As another Google exec said to me: “News media should not forget that we don’t need them to thrive…”